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The testimony of a former PAULSON & CO official could undercut the Securities and Exchange Commission's fraud case against GOLDMAN SACHS, CNBC has learned. Goldman Sachs Getty

Images The former Paulson lieutenant, Paolo Pellegrini, testified that he told ACA MANAGEMENT, the main investor in a Goldman mortgage-securities transaction, that Paulson intended to bet

against—or short—the portfolio of mortgages ACA was assembling. If true, the testimony would contradict the SEC's claim that ACA did not know Paulson was hoping the mortgage securities

would fail and weaken charges that Goldman misled investors by not informing ACA of Paulson's position. The SEC also claims Goldman told ACA that Paulson would take an equity stake in

the collateralized-debt-obligation deal, apparently to bolster the value of the underlying securities. However, CNBC has examined documents showing that Pellegrini testified that there was

no equity stake to be had in the deal. According to documents, a government official asked Pellegrini whether he informed ACA manager Laura Schwartz about Paulson's position in the

portfolio, named Abacus 2007-AC1. Pellegrini said there were at least three meetings with Schwartz and that he told her during at least one of them either what type of securities Paulson

wanted in the portfolio or that the hedge fund intended to short them. One meeting took place at a ski lodge bar in Jackson Hole, WY. In a statement to CNBC on Wednesday, SEC spokesman John

Nester said: "Our case is built on a thorough evidentiary record that includes testimony, documents, hand-written notes and emails and will be presented in court at the appropriate

time." Neither Pellegrini nor Paulson & Co has been accused of wrongdoing. Pellegrini has declined to comment to CNBC. In one part of Pellegrini's testimony, a government

official asked him: "Did you tell (Schwartz) that you were interested in taking a short position in Abacus?" "Yes, that was the purpose of the meeting," Pellegrini

responded. "How did you explain that to her?" the government official said. "That we wanted to buy protection on traunches of a synthetic RMBS portfolio." Pellegrini

said. The SEC does not mention this exchange in its complaint against Goldman. * _SLIDESHOWS: HOUSING MARKETS MOST LIKELY TO HAVE HIT BOTTOM_ * Favorite Wall Street Whipping Boys _ * Hedge

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